| 5-913070 | |
| 24(1) | D. Bouffard |
| (613) 957-8953 |
19(1)
June 11, 1992
Dear Sir:
We are writing in reply to your letter of October 31, 1991 wherein you requested our comments regarding the application of the Income Tax Act (the "Act") to valuation of inventory. We apologize for the delay in responding to your letter.
New subsection 10(2.1) of the Act, applicable with respect to computations of income for the 1990 and subsequent taxation years, has been legislated to add support to the longstanding Department's position described in paragraph 4 of Interpretation Bulletin IT 473. It is generally recognized in commercial and accounting practice that inventory must be valued in the same manner from year to year unless exceptional circumstances dictate otherwise as discussed in paragraph 4 of the IT 473.
As a result, the alternative valuation methods set out in Section 10 of the act and in Regulation 1801 should not be construed to permit unwarranted changes in method and especially not repeated changes primarily for the purpose of minimizing taxes.
Yours truly
For DirectorManufacturing IndustriesPartnerships and Trusts DivisionRulings DirectorateLegislative and IntergovernmentalAffairs Branch